Geriatric financial lessons learned

For first-time readers, let’s back up a bit on why this was necessary. Dad’s Alzheimer’s has progressed to mid-stage and we didn’t have power of attorney. He lived independently as long as he could, but he didn’t have any safety nets in place because (as is common among elders) he wanted to stay in control.

Up to a point, Dad’s finances could have been handled with a power of attorney. However that has two flaws: (1) a POA can be canceled anytime by its grantor, leaving elders vulnerable to manipulation & fraud, and (2) POAs can’t be executed if the grantor is considered incompetent— lawyers and notaries just won’t do the paperwork. Even worse (from the family’s perspective) most financial institutions require POAs on their own forms (more notaries). When a POA is no longer an option, the next step is a conservator.

In most states, a probate court appoints a conservator from the protected person’s nomination (family/friend) or chooses a contractor. Most probate courts require periodic reports and some may even require the conservator to get the court’s permission before spending any money. The protected person becomes a ward of the court and the conservator is just doing the court’s financial business for their ward.

If my father or I had been more astute about POAs and declining cognition, we would have executed one when he began showing symptoms. Dad didn’t want to “give up control yet” and at the time I saw no way around that obstacle. Today I know that he should have had a lawyer prepare a POA while he was still competent. Dad could have had it notarized and kept it in his personal files, ready to hand over to us adult children when the time came. You can’t easily notarize a POA from the hospital’s ICU when the grantor is clearly suffering from dementia.

Dad’s independence ended when he went to the emergency room in March 2011 with a perforated ulcer. Two weeks later he moved to his care facility, and my brother and I started the legal petitions for conservatorship and guardianship. Many states will allow their residents to do this without a lawyer, and advocacy groups offer free help, but it’s difficult. Most adult children have their own families and careers and don’t have the time or knowledge to pursue this seemingly insurmountable task. (Another reason that I’m thankful for financial independence. Even from three time zones away, some weeks I was still spending 10-15 hours on Dad’s affairs.) In our case we hired a geriatric care manager who recommended a lawyer.

Petitions are considered low-margin legal work, even at $275/hour. They’re also not particularly urgent (unless the elder is clearly in danger) and the courts are frequently backed up with higher-priority cases. I’m told that this situation means a conservator petition usually drops to the bottom of a lawyer’s To-Do list.

“Our” lawyer didn’t even contact Dad until three months after we’d hired her. (Cynically, I suspect that she only got moving when my brother decided to find a new lawyer.) She thought Dad was competent to sign a POA but after talking with him for an hour she realized that he was not. It took her another two months to find a psychologist to do an in-depth three-hour functional assessment interview. Once that report was ready the lawyer was repeatedly afflicted with illness, computer problems, a new probate court judge, outdated forms on the court’s website, and a number of other excuses obstacles. The petition was finally filed in November.

In Colorado, the petition only starts the investigation. Petitioners have to provide a criminal records check, a credit check, and photo IDs. The court appoints a “visitor” to interview everyone. Even if the petition is unopposed, the process can become adversarial. The visitor asks the protected person whether they’d like their own lawyer, which Dad decided was “a good idea”. The visitor specifically asked me why my father had nominated me and why I thought I was qualified to be a conservator. (He asked everyone else those questions about me too. Court visitors must hear a lot of scary answers.) Since I’m not a Colorado resident I had to sign an extradition waiver (in case of my misconduct) and I even had to apply for approval to “appear” at the hearing by telephone conference instead of in person. Although the petition was unopposed, “luckily” I wasn’t required to post a bond or to set up a spending account with the court.

The visitor filed his report and the hearing was scheduled for 19 December.

After conservators are appointed by the probate court, they have to file an initial report of the protected person’s finances. I’d already drafted one from the court’s forms and I’d submitted it to our lawyer in October. Wednesday night before the Monday hearing, however, I received one of her typical e-mails:

I have reviewed your draft Conservator’s Inventory and Financial Plan, as has your dad’s attorney. We agree that you need to make some additions to page 6 – 7, Item D. Under professional expenses and legal fees, enter $0 for guardian, conservator and guardian ad litem. Under Protected Person’s attorney’s fees, state $0 monthly, $500 – $1,000 (estimate) total under Annual. For Petitioner’s attorney’s fees, state $0 monthly, $3,000 (estimate) total under Annual. State $0 for care manager and CPA unless you plan to use someone. State $0 for other categories. Enter totals in Part V, Section B.
Then, please sign and fill in the Certificate of Service. Although you’re filling in this section, I will take care of mailing or e-serving the parties.
Once you have completed these steps please send a PDF copy, with your signature, to my paralegal AND send the hard copy via Federal Express. Please feel free to call me if you have any questions.
PLEASE SEND THE PDF AND FEDEX RIGHT AWAY SO THAT WE RECEIVE IT PRIOR TO THE HEARING.

Note the uppercase text– in case I wasn’t paying attention? The “crisis management” could have been avoided if the lawyer had considered these estimates a month ago. But $75 and three hours later, the forms were ready for Thursday’s Hawaii flight to Colorado. They arrived at the lawyer’s office Monday morning. She later apologized for adding the stress.

The hearing was Monday afternoon. At first it was scheduled for 2:30 PM, then the week before it was changed to 2 PM. At first it was in one room (with one teleconference number), and then it changed again (with a different number). 90 minutes before the hearing they changed it yet again. I’d been trying all the phone numbers but apparently the lines weren’t actually connected to phones. When I dialed in to the latest number at 2 PM the clerk finally answered, and I had to explain where to find the rest of ohana Nords & lawyers. I was on hold for 25 minutes before we got to listen to the 10 minutes of the judge reading the appointment order. Over the phone I heard my father respond to a couple of questions (“Yes, your honor”), and I don’t think my brother had to say anything at all. The judge commented to my Dad that he was fortunate to have a son who was actually qualified to make a plan for this situation.

The court’s appointment order and my conservator’s letter arrived eight days later via FedEx. My report is due to the court in three months. Due to the negligence of other guardians & conservators, our appointments are only good for 30 days past the annual filing deadlines. No report, no new appointment letter.

From March-November we accrued $6834 in legal fees. (This includes just over 21 hours of the lawyer’s time, spread out over nearly nine months.) December’s work was probably another $3500 (I don’t have an invoice yet). The psychologist was $3670, half due in advance and the rest upon receiving his report. To the lawyer’s credit, we’ve only been asked to pay $1842 of her fees with the rest due upon final billing.

~$14K in legal & medical fees– all because we didn’t have a POA ready for the inevitable.

As you can imagine, we’re a bit out-of-pocket for expenses. If you’re caring for an elder, then you should have an emergency fund in case it takes a while to reimburse your expenses.

Back in April, Dad’s small-town bank manager noticed I’d written out the checks that Dad signed for his apartment rent & utilities. She suggested that a POA would be a good idea. She didn’t actually freeze his accounts, but it was clear that my help was only welcome with one. Dad’s checking account receives his pension payments & Social Security (via electronic direct deposit), and I’m reluctant to mess with that. Eight months later, you would think that Dad’s bank manager would read the probate court order and give me access to his accounts. That’s only technically correct.

When I e-mailed her the court order, she didn’t just divulge his account login & password. Instead I’m being asked to apply for access to his account: scans of my photo ID, a personal info form, a signature card. (Never mind that the court already did this.) Banks don’t do this online– snail mail only– and I bet I have to get something notarized, too. Only then will I be “given” my own online access to his checking & savings accounts. Ironically I’m planning to triple the amount of money that Dad has on deposit with the bank because they have a decent CD rate. I can only imagine how I’d be treated if I’d announced that I was moving his business to PenFed.

After my experience with Dad’s bank manager, I am not motivated to notify Dad’s brokerage of my conservatorship. I plan to close all of his other mutual fund accounts, and I don’t really want to discuss conservatorship with the other fund companies, either. Dad’s brokerage will handle the transaction for a “transfer in kind” of his assets from the fund company. I certainly don’t see a reason to tell anyone else in Dad’s financial life unless they specifically ask me.

I wonder whether most families use POAs, let alone conservatorship. When Mom or Dad can no longer take care of things, they could turn over the logins/passwords to a trusted adult child who could handle their finances. You can do it all online if you know the answers to the verification questions. Presumably you have the parent’s consent to act as their fiduciary, but that probably still violates some sort of fraud law. It’s legal if the adult child is a joint owner of the parent’s financial accounts, but that leaves the elder’s assets vulnerable to litigation if anyone sues against the adult child’s assets. It also leaves the adult child open to sibling disputes.

Once I get Dad’s finances in order then there’s not much to the routine. His only monthly bills are to the care facility and the pharmacy. I deposit a monthly long term care insurance payout, which will continue until late 2014. An occasional payment to my brother for Dad’s restaurant meals & shopping trips. Annual renewal of his Medicare supplemental insurance policy. Annual tax returns & quarterly estimated tax payments. Annual report to the probate court.

Over the next couple years I’ll move Dad’s asset allocation from 70%-20%-10% stocks-bonds-cash to something more like 25%-25%-50%. I can do most of it under the long-term capital gains tax rate of 0%. Of course if the stock market gets stupid high then I’ll start cashing out and paying more taxes. Dad doesn’t need to stay in equities.

Dad’s still happy and doing fine. He just had his third chemotherapy session, with three to go. So far so good. He’s tolerated everything surprisingly well, he’s up & walking around again, and he’s no longer complaining of pain from the multiple myeloma symptoms. He came back from the second chemotherapy session with no nausea and was even hungry for dinner. This month’s pharmacy bill reads like a drug dealer’s arrest report, with four new medications for nausea & pain. The care facility says that they’re all “as necessary”, and Dad tends to ignore painkillers. Hopefully the medication won’t cause any problems with his balance or coordination or any other side effects, but he had no problems at the court hearing.

I’m glad this is finally settling down, and I hope it’s my last post on the subject for a while. I’m looking forward to a much quieter 2012.

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Note that a successor trustee only assumes duties and has powers to manage trust assets AFTER the trustee dies, so if there is a possibility of disability or incompetence, a co-trustee should be appointed and then he/she will have the power to manage and/or co-manage the trust. You have to be sure you always have someone you can rely on is competent to manage trust affairs.

RE: POAs and incompetence. Depending on the state laws, a durable power of attorney can continue in place regardless of the originator’s current state of mind, and can be set up to “spring” into effect on the incapacity of the giver. However, a living trust with a successor trustee is probably easier, since as you note most financial institutions will require a POA [notarized] on their own form and if the senior has control concerns, putting that in place prior to its becoming necessary can be difficult.

I think the hardest part is convincing an elder to “do something”, whether it’s a POA to be tucked away in their files or a lawyer’s bill for a living trust. As the Boomers age and these discussions become more common, I think everyone will be more open to having the conversation and taking action.

Spouse and I have made joint accounts and trust arrangements in our own finances. The generational turnover problems will stop here.

Thanks Doug,
The posts about your Dad’s care are an eye opener for me, and it is hard to imagine how the “average” family member would be able to cope with the system. I can understand the legal hurdles are intended to protect helpless seniors from unscrupulous caregivers. There are books an stories about this.

That said, I don’t understand how it has to be so complicated. Isn’t there another way using “Living Trusts” that avoids the court system altogether? My parents had a living trust where they were co-trustees, and I was successor trustee. After Dad died I could have been appointed a co-trustee, but that was not needed since Mom was competent. I did have a medical power of attorney for her. When Mom passed away, the lawyer gave me a notarized legal document titled “Acceptance of Office of Trustee” which I sent to each financial account holder, and then I became the trustee of the asset. Every asset my parents had — house, car, bank and security accounts was in the name of the trust — it is critical NOT to miss this step — and then I had full authority to manage or dispose of them. It was seamless and easy with courts and lawyers never becoming involved. Originally there were legal expenses of probably $5,000 to set up the living trust and occasional reviews of the trust and “pour over will” which assigned any personal property still owned to the trust, but these costs appear less than the legal fees and medical fees you discussed with none of the time or frustration.

Am I missing something or are living trusts a good alternative to conservatorship?

This sounds like an excellent way to handle it! I know living trusts have a reputation for being a hassle to set up and maintain, but this would have avoided even more hassle.

Maybe living trusts are also more popular for estate planning, and few consider the convenience of having a trustee step in for incapacity or incompetence. We’ve certainly had our eyes opened to the pitfalls. Today my spouse can pick up right where I leave off with our joint accounts and the logins/passwords, and a trust sounds like a great way to make sure the same transition happens with our daughter.

Yes, a revocable living trust is great for estate planning, since any asset in the name of the trust — and all assets should be moved into the trust — avoids probate, but I think a living trust is just as useful for handling incapacity or incompetence.

A living trust does take a bit of time and money to set up, but there is almost no hassle to maintain it. Income from assets is reported with a 1099 or K-1 as income on the trustee’s individual tax return.

Usually a husband and wife begin as co-trustees. Either can resign if the situation develops they are not competent to continue. It is important there is always at least one trustee who is competent to manage affairs. A new co-trustee can be named, who could be a son or daughter, or the child can be named as a successor trustee, who in effect become the estate’s beneficiary on the death of the founding trustees. It is also important to have an institution — such as a bank trust department — named as the ultimate successor in case there is no other successor trustee alive. Institutions are supposed to outlive us all.

Did that lawyer actually zero out any financial remuneration for your work? Wow…..while I don’t think one should fleece one’s parents, and in your case this may be a different issue, however, there are expenses to doing a lot of that work – even you pay your brother for monthly restaurants and mall visits with your Dad.

Second – your patience with all of this is amazing…..what you’ve described tells me the legal system has definitely turned out to be a hindrance to this…imagine, your father has two son who have demonstrated their devotion and are not interested in getting rich off of Dad. It seems as though you are being punished for all who acted poorly before you.

Lastly, did you really mean that if you had a POA, this might not have all needed to happen? It seems as though the POA wouldn’t have helped at all in the end as you would have had to go for a conservatorship anyhow. Is that the case? I’m shuddering in the case of my parents….I don’t have a sibling.

Actually I zeroed myself out to make sure that there weren’t any other legal hoops to jump through. Although conservators can be paid for their labor, that’s considered more appropriate for a contractor than a family member. But I’ve reimbursed myself for my travel expenses (airfare) as Dad’s always done for us, and for the medical expenses that had to go on a (my) credit card. Dad also agreed to foot the bills for the expenses of the geriatric care managers and the legal fees. Fair enough.

Dad insists on paying for lunch since my brother does the driving. I reimburse my brother from Dad’s account for those expenses, and my brother tells Dad that he picked up cash at the ATM for him. So Dad actually really does pay for lunch.

The reality is that whatever my brother wants, I give him. He’s on the front lines of the care situation and I’m a REMF. I’m going to give him the support he needs to make the hard choices, and I’m not going to nitpick his decisions. Personally I suspect that we each feel as if we’re getting the better part of the deal… I guess that’s as close to “happy” as this situation allows.

I think that the conservator’s legal system is designed to protect the rights of the court’s ward from adverse proceedings. This is definitely the most painful way to obtain fiduciary responsibility. Non-profit service associations can help with guardianship but it’s an overwhelming task even with a lawyer. There’s also the perpetual concern that a self-representing plaintiff may screw up or annoy the judge into appointing someone other than family. Having a lawyer is reassurance that at least someone’s following the process. Or should be.

If we’d had a POA, then in strictly legal terms it would have had to be surrendered when Dad became fully mentally incompetent. At some point an Alzheimer’s patient is supposed to have a guardian and a conservator legally responsible for their care. However I suspect that most families and care providers ignore that issue except for family disputes or Medicaid. If I’d had Dad’s POA, and his banking & brokerage logins/passwords, then those financial institutions would never know when he was no longer competent. And for every other elder who’s coping with dementia or other medical issues, the financial institutions would never know who’s logging in to pay the bills.

I don’t think the financial institutions will ever need to hear from me again, especially when I’m set up online. His bank is no PenFed, but I’m reluctant to mess with the direct deposit of his pension & SS…

Thank you for sharing what must be an emotionally draining experience so that hopefully we (your readers) can learn from your situation. I find your posts engaging and thoughtful. As an active duty Army spouse stationed in Japan, I can relate trying to care for aging family members from afar. Good luck with your Father and keep us posted.